Official blog of Gurcharan Das. He is the author of India Grows at Night: A Liberal Case for a Strong State (Penguin 2012);The Difficulty of Being Good: On the Subtle Art of Dharma (2009),India Unbound (2000),a novel,A Fine Family (1990),a book of essays The Elephant Paradigm (2002) & an anthology of plays,Three plays (2003). He writes a regular column for the Times of India and 5 Indian language papers and occasional pieces for the Wall Street Journal, Financial Times, and Time magazine.

Sunday, March 15, 2009

‘Oh, so you are one of them!’ is how someone greeted my nephew, who is embarrassed to tell people that he is an investment banker. ‘I’d rather say that I run a brothel,’ he says. ‘At least, that’s a business people understand.’ Bankers, having brought the world economy to its knees, have become pariahs overnight and a target of people’s rage. International Labour Organization warns that global unemployment could hit a staggering 50 million. A typical knee jerk reaction is call it ‘greed’ but that is not helpful. We have always known that if envy is a sin of socialism, greed is a failing of capitalism. Much has been written of this crisis but not enough about its moral quality. Do free markets inherently corrode character?

There were many dharma failures in this drama. When U.S. house prices were rising and interest rates were low, even the poor got a chance to get a mortgage and a home. Who could oppose that! Banks combined these mortgages into a collateral debt obligation (CDO), got it rated, and sold it to institutions, who also gained through better returns. When the housing market turned down the CDOs became toxic. Who do you blame? In a sense all are guilty. There is a fine line between self-interest and selfishness and the balance of dharma tipped the wrong way. The undeserving recipient of the loan lied about his ability to repay; the banker, moved by short term reward, promoted the ‘sub-prime’ mortgage; the rating agency was dishonest in colluding with the bank; the institution who bought the risky CDO failed in its duty to protect its shareholders.

The calamity might have been contained if Lehman Brothers had been bailed out on September 14, 2008. The old rivalry between Dick Fuld, the CEO of Lehman Brothers, and Hank Paulson, the former CEO of Goldman Sachs may have come in the way. The blue bloods at Goldman Sachs had long harboured a deep prejudice against the upstarts at Lehman. Fuld was arrogant and always managed to steal the limelight. But Paulson, as U.S. Treasury Secretary, possibly unconsciously, allowed personal prejudice to distort his thinking when he refused to save Lehman. When Lehman collapsed, so did confidence and bank liquidity, and this was the tipping point of the global collapse.

It is extraordinary that there is no remorse. Investment bankers who tipped the global economy into a recession, still expected bonuses, as though they had a God given right to earn more than ordinary human beings, much like the aristocracy just before the French Revolution. Particularly embarrassing was the disclosure about John Thain, chairman of Merrill Lynch, who spent $1.2 million to do up his office, which included a $1400 waste paper basket and $35,000 commode in the bathroom. He paid $4 billion in bonuses to his executives when Merrill Lynch had declared a loss of $15 billion in Q4. When he said that bonuses were needed ‘to retain the best people’, someone quipped, ‘What best people? They just lost you $15 billion!’

It is a lesson for the millions in India who have just risen into the middle class. Successes of capitalism produce over time enervating influences when a generation committed to saving is replaced by one devoted to spending. Ferocious competition is a feature of the free market and it can be corrosive. But competition is also an economic stimulant that promotes human welfare. The choice is not between the free market and central planning but in getting the right mix of regulation. No one wants state ownership of production where the absence of competition corrodes the character even more. The answer is not to seek moral perfection which inevitably leads to theocracy and dictatorship. Since it is in man’s nature to want more, let’s learn to live with human imperfection, and seek regulation that not only tames crooks in the market but also rewards dharma-like behaviour.

A person who lost her job because of troubles on Wall Street, insistently asks, ‘Why me? What did I do to deserve this?’ Draupadi asked the same question in the Mahabharata. ‘When everything was going well for us, why was our kingdom stolen in a rigged game of dice?’ She wants her husband to raise an army, and win it back. But Yudhishthira says that he has given his word. ‘But what is the point of being good?’ she asks. To which he replies, ‘I act because I must’. It is the uncompromising, compelling voice of dharma. This is an answer that the investment bankers might ponder.------

About Me

Gurcharan Das has recently published a new book, India Grows at Night: A liberal case for a strong state (Penguin 2012). He is also general editor for a 15 volume series, The Story of Indian Business (Penguin) of which three volumes have already appeared.
He is the author of The Difficulty of Being Good: On the subtle art of dharma (Penguin 2009) which interrogates the epic, Mahabharata, in order to answer the question, ‘why be good?’ His international bestseller, India Unbound, is a narrative account of India from Independence to the global information age, and has been published in 17 languages and filmed by BBC. He writes regular column for several news papers and periodic guest columns for the Wall Street Journal, Financial Times, Foreign Affairs, and Newsweek. Gurcharan Das graduated with honors from Harvard University in Philosophy, Politics and Sanskrit. He later attended Harvard Business School. He was CEO of Procter & Gamble India and later Managing Director, Procter & Gamble Worldwide (Strategic Planning). In 1995, he took early retirement to become a full time writer.
Visit http://gurcharandas.org for his complete work and profile.